I’ve long been a proponent of charging more, earning more, and feeling good about it. I’ve asked countless entrepreneurs to consider the value of their skills in a New Economy market where those skills are highly prized.
But there’s one thing that nags me about where this conversation inevitably goes.
When service providers, makers, and microbusiness owners of all ilk become empowered to consider pricing on a new level, they say, “I’m going to charge what I’m worth.”
There are two serious problems with this mantra:
1) You are priceless. Your work is not.
There’s really no way to quantify what “you’re worth” because you can’t measure the value of your precious life. However, skills, products, and services are quantifiable. There’s a going rate. And there is also the ability to raise or lower the going rate depending on how you position those skills, products, or services.
2) You’ve forgotten the customer.
There is no value without the customer. How much is doctor worth without patients? How much is a house worth if no one will buy it? How much is a company worth if the investors all bail? What you make or offer has no value until a customer is willing to purchase it.
Dave Gray states it plainly in The Connected Company: “A company can’t create value on its own: value is only created through exchange. The customer must participate in defining and determining that value.”
So how can you address this in practical terms?
Understand the whole market.
There’s no one set price for a cup of coffee. Go to a gas station and pay 69 cents. Go to a fast food joint and pay a buck. Go to Starbucks and pay $2. Go to Blue Bottle in San Francisco and pay $7.
Your market is likely the same. You know you’re not at the bottom of the barrel and you have no interest in being there. But have you explored the rest of the market? Do you know what the top-of-the-line looks like and how much it costs? Once you do, back track and complete your understanding of the whole market.
Determine what influences price.
Price goes well beyond materials, overhead, and labor. It goes well beyond experience and skills. Those are just factors that contribute to understanding a sustainable price from the business’s point-of-view. But many other factors influence price from a customers’ point-of-view.
What the product means to them, what results the service promises, and how your customers perceive your business in relation to the rest of your industry all contribute to what you can (and should) charge. The style of your website, the way your images are merchandised, the testimonials you provide (and the way they’re written), and your sales process give your customers a distinct impression of what your product or service is worth.
Adjust as necessary to make the price you want to charge match what your customers want to pay.
There may be many factors currently influencing the price you can charge that have consequences you don’t like. It might be hard–even unpleasant or expensive–to change them. It might involve better packaging, a shinier website, or more training. But it could also be as “simple” as introducing your work to a new group of customers or changing the way you talk about what you do.
Take full inventory of the factors currently influencing your price, both from your business’s perspective and from your customers’ perspective. Determine which factors you can change to create a better result for your business. Create an action plan to do just that.
And stop telling people you’re going to charge what you’re worth… Click to tweet.